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cash distribution made to Yung, so we needn’t concern ourselves
with that portion of the adjusted basis equation. And the
Commissioner has conceded that Yung contributed at least $88,500
to the partnership since 1993. However, even if we take that as
a starting point to determine his adjusted basis, we have no
record of Yung’s distributive share of income or losses in the
partnership during the previous five years. A line item on the
1998 balance sheet shows “losses carried forward,” which implies
Yung was unable to claim prior losses due to a zero adjusted
basis. But the Court probed the Chong brothers on their
understanding of partnership tax law and finds that this item on
the statement is, more likely than not, Lok’s estimate of prior
losses that should have been claimed but weren’t.
It is simply impossible to state with any certainty what
Yung’s adjusted basis was. It is therefore impossible for us to
say how much of any potential loss Yung could have claimed in
1998. Because we are unable to determine how much loss Yung
could potentially have claimed, we sustain the Commissioner’s
disallowance of the partnership loss on this alternate ground as
well.
II. Schedule C Deductions
In addition to full-time employment and his interest in the
partnership with his brother, Yung also pursued a multilevel
marketing business with NuSkin. He reported this business on his
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Last modified: May 25, 2011